As I read it, you must pick from three choices; discard two clue tokens, or discard an ally, or be devoured. Lists separated by commas have to have a conjunction before the final item, in this case, "or". There's no "and" to make clues and an ally a separate (and inclusive) list.

Yes there are some errors of grammar/syntax in the sentence. This is how I read it:

Each investigator must either discard three Clue tokens or one Ally, or be devoured. Chaugnar Faugn cannot have more than three doom tokens removed from his doom track during a single round of combat - he ignores all further successes

But it does look a little as though they intended:

Each investigator must discard three Clue tokens, one Ally and &ltsomething else that got dropped in an edit without fixing the syntax&gt, or be devoured. Chaugnar Faugn cannot have more than three doom tokens removed from his doom track during a single round of combat - he ignores all further successes.

Frankly either way is pretty harsh and is one of the reasons we call it a loss when the AO wakes.

Thanks for the replies! Looks like I was indeed reading it wrong and I can see that it is a case of three different options. Whereas I was reading it as "discard three Clue tokens, one Ally, [otherwise] be Devoured" which is what was causing the confusion.

Regardless of my mistake we would have all been Devoured by the end of the second round of combat in the Final Battle. These IH AOs are brutal and I can't imagine defeating them.